Illustration: Peter C. Espina/GT

Billionaire and dealmaker Wang Jianlin was back in the acquisition headlines last week, when his increasingly diverse Wanda empire announced it would buy US-based Carmike as part of it its dream of building the world's biggest theater chain operator. But theaters are just one of a growing number of items on Wanda's recent list of mega-projects, which has also included plans for a multibillion-dollar European theme park, a major e-commerce venture, and investments related to sports and its core real estate products and services.

The sudden diversification looks similar to ones by other cash-rich Chinese companies, most notably e-commerce giant Alibaba, and reflects a desire to move beyond their original businesses into new growth areas. While such a strategy seems logical, Western experience has shown that such rapid diversification more often results in dysfunction rather than synergies, and frequently ends with the eventual break-up of such companies into smaller units focused on individual areas of expertise.

Wanda Group's roots lie in real estate, and the company is famous for its signature brand of clean and well-run shopping malls and office complexes throughout China. But possibly fearing an over-reliance on real estate, founder Wang has embarked on a massive diversification drive over the last three years that would leave many Western executives scratching their heads, due to its huge diversity both geographically and in terms of product areas.

The drive was in the headlines last week when Wanda announced it would pay $30 per share to buy US theater operator Carmike, valuing the company at $1.1 billion. Wanda would combine the company with its previously purchased AMC Entertainment to create the largest US movie theater operator with 8,400 screens, surpassing current leader Regal Entertainment's 7,400. That move complements Wanda's own push into China's domestic movie theater business, where it has built the nation's largest chain with more than 2,500 screens in 300 theaters.

But movie theaters are just one of Wang's recent passions. Just a week ago, Wang was also in the headlines for another blockbuster deal that saw Wanda announce it would jointly build a major new theme park near Paris for $3.3 billion. And just last month, the company announced it would buy US film studio Legendary Entertainment, the maker of hit movies like Jurassic World, for another $3.5 billion.

Wanda's other major purchases over the last three years run a wide range of sectors, including its acquisition of a British yacht maker, a stake in Spanish soccer club Atletico Madrid, a major e-commerce initiative and plans to build a global chain of high-end hotels.

While some might argue that many of Wanda's investments are in the entertainment sector, it's worth noting that few of its major Western counterparts hold such a wide range of assets. Instead, most are focused on specific areas, which allows them to maintain a focus on their core business without other distractions. Such a strategy also gives investors a clearer picture of what they are buying.

Even Disney, one of the more diverse Hollywood studios, focuses mostly on movie making and theme park operation. Western Internet giants like Amazon, Google and Facebook are also mostly focused on one or two core businesses, contrasting sharply with names like Alibaba that have invested in diverse areas ranging from film making, to drugs and financial products and services, just to name a few.

Conglomerates like the one Wang is now building were once also popular in the West. In fact, many big Hollywood studios were previously owned by such diverse names as General Electric and beverage giant Coca Cola. One classic conglomerate to rise in the 1970s was a company called Gulf and Western, which in its heyday owned the Paramount movie studio, but also such diverse assets as a clothing company, several metal producers, a publisher and sports teams.

Most of these big Western names later sold off most of their unrelated assets after their empires became too unwieldy and confusing for investors, and also distracting for top managers who had to keep track of too many different businesses in unrelated areas.

Wang and others like Alibaba founder Jack Ma should take note of this historical trend, and try to focus their efforts on their core strengths rather than building huge diversified conglomerates. If they fail to do so, they could quickly find themselves sitting atop new empires bedeviled by complexity and dysfunction, scaring away shareholders and driving down their companies' values.

The author writes about China's company news at http://www.youngchinabiz.com/. bizopinion@globaltimes.com.cn